On October 9, 2014, the Pharmaceutical Research & Manufacturers of America (“PhRMA”) filed a lawsuit seeking to enjoin the Health Resources Services Administration (“HRSA”) from implementing its July 23, 2014 “Interpretive Rule” regarding orphan drugs in the 340B Drug Discount Program (the “2014 Interpretive Rule”).  PhRMA’s lawsuit alleges that the 2014 Interpretive Rule “violates the plain language of the statutory orphan drug exclusion” and should be invalidated as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”  The lawsuit is pending before the D.C. District Court.

Previously, on May 23, 2014, the D.C. District Court vacated HRSA’s July 23, 2013 Final Rule (the “2013 Orphan Drug Rule”).  As further discussed in our previous posts (June 18, 2014, May 27, 2014, October 3, 2013, July 22, 2013), the 2013 Orphan Drug Rule permitted new covered entities established under the Affordable Care Act (free-standing cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals) to access 340B pricing on orphan drugs, so long as the drugs were not to be used for an orphan indication.  Following that opinion, HRSA announced that although the court “vacated the orphan drug regulation on the grounds that HHS lacks the statutory authority to engage in such rulemaking,” the court “did not invalidate HRSA’s interpretation of the statute.”

HRSA’s 2014 Interpretive Rule, the subject of PhRMA’s current lawsuit, essentially reiterates HRSA’s intent to enforce its interpretation of the statutory orphan drug provisions as originally set forth in the now-vacated 2013 Orphan Drug Rule.  The 2014 Interpretive Rule adopts the same interpretation, and HRSA has indicated that it intends to enforce this interpretation against manufacturers that it deems to be noncompliant.  As a practical matter, the HRSA interpretation would require manufacturers to discount their orphan drugs to certain purchasing covered entities, so long as the entities were purchasing for a non-orphan condition (which may include off-label uses).

Manufacturers with orphan drugs that participate in the 340B Drug Discount program are strongly encouraged to familiarize themselves with the potential legal issues and the status of the ongoing litigation as they evaluate how to best remain compliant with the 340B Drug Discount Program and with Food, Drug, and Cosmetic Act marketing restrictions.

Posted by Kathleen Peterson

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